Watch Out For the Tax Torpedo

     Some strategies for maximizing the amount of social security benefits we can collect have recently been phased out, but that doesn’t mean the decision of when to start collecting benefits is a simple one.  Retirees that begin taking social security early and also have other income, including IRA distributions, may wind up paying more in taxes than those that delayed taking social security until later.  That’s because, while 100% of IRA income is subject to tax, not all of your social security income is subject to tax.  Retirees who wait and have more social security and rely on less other income to meet their needs will wind up paying less tax that those that started social security early.  This has become known as the “Tax Torpedo”- a hidden tax that your don’t see until it hits you.

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